(The news featured below is a selection from the news covered in the Federal Securities Law Reporter, which is distributed to subscribers of SEC Today.)

SEC Institute Panelists Discuss Staff Reviews and Executive Compensation

Todd Hardiman, an associate chief accountant in the Division of Corporation Finance, reviewed developments in SEC reporting at last week's forum conducted by the SEC Institute. The staff completed its first three-year review cycle mandated by the Sarbanes-Oxley Act, which focused on risk areas such as revenue recognition or critical accounting estimates rather than cover-to-cover reviews. Hardiman noted that the SEC hit some technical snags when it decided to post staff comment letters on the SEC's Web site, resulting in a backlog of letters. The staff hopes to eliminate the backlog by the end of the year. Hardiman also advised that the staff has begun to post effective registration statements on the Division's Web page.

Christine Davine, a partner with Deloitte & Touche LLP, noted that the initial concerns about the posting of comment letters has calmed down quite a bit, but there has been an increase in requests for confidential treatment. She advised that a registrant cannot submit a blanket request for confidentiality. The comment letters are a useful resource tool, in her view, to identify best practices and to see the issues on which the staff is commenting. 

Davine also addressed the tremendous amount of buzz surrounding the SEC's promotion of data tagging through the use of XBRL. Companies should consider making voluntary submissions using XBRL, she said, in order to be known as an innovator and to obtain recognition from the SEC. She added that it is an opportunity to gain a better understanding of XBRL while it is still voluntary and companies will gain expedited review of their filings. Chris Holmes, a partner with Ernst & Young LLP also noted that EDGAR began with a pilot program, and said he believes that XBRL eventually will become mandatory.

Bill Sherman and Tom Knox of Morrison Foerster reviewed the status of the SEC's executive compensation proposal. Sherman urged companies to get their disclosure controls and data mining operations in place and start capturing now the data that may be required in 2007. He predicted the adoption of a final rule in October. The SEC has received over 20,000 comment letters in response to the proposal, but Sherman said a large percentage of them are form letters as a result of the AFL-CIO's letter writing campaign.

The proposal calls for "charts galore," he said, and companies will be required to put some "holy cow" numbers in their proxies with the total compensation disclosure column. Sherman added that the proposal will require a broader set of skills to comply, including legal, actuarial and mathematical modeling.

Sherman believes there will be some movement by the SEC in the provision referred to as the "Katie Couric clause" that would require companies to disclose the salaries of up to three highly compensated employees who earn more than the named executive officers. A majority of the commenters opposed the proposal. He said the proposed disclosure on severance and payments upon change of control may also produce some "holy cow" numbers.

Sherman predicted that the SEC will address the double counting concerns that have arisen in connection with the compensation tables and that the total compensation table will remain in the final rule. The proposed rule also calls for the disclosure of a company's policy on clawbacks of previously awarded compensation if the financial information on which awards were based is later restated. Sherman said that many companies are already going after such awards on basic fiduciary grounds.